Case Analysis of Southwest Airlines
             • The hub-and-spoke model used by the nation's largest airlines was designed to extract high fares from customers while moving them seamlessly to points around the globe.
             • By the end of 2000, the cracks in the hub-and-spoke model became evident. Both business and leisure travelers began seeking cheaper airfares. Increased fuel costs, fewer travelers, and the high labor costs they had granted to keep peace with the unions trapped the major airlines.
             • The continued tough airline market in 2002 gives a boost to low-cost airlines, which now fly 32 percent of domestic passengers. These airlines include AirTran, ATA, Frontier, JetBlue, and Spirit. Southwest is by far the oldest and largest of the low-cost airlines.
             • Southwest Airlines has a history of being aggressive during tough times. Looking at the airline industry one month after the terrorist attacks of September 11, 2001, Southwest was repeating this behavior. Instead of cutting costs by reducing its flight schedule and laying off workers, Southwest kept all its employees and flights. Management cut costs by delaying delivery of 11 new Boeing 737s and reducing travel-agent commissions.
             • Southwest emphasizes an easy-going, relaxed corporate style that provides employees with extensive operational independence. Southwest has experienced an extraordinary in traffic growth over the past five years, about 20-30% annually. When the company performs well employees are generously rewarded through the profit sharing program, and many employees realize big gains in their stock ownership.
             II. Major Problem/Issue Identification:
             1. The excessive expenses of the hub-and-spoke model are taking its toll on the largest airlines during the current downturn. American, United, and Delta account for 60 percent of the industry's revenue, but their collective net loss of $2.14 billion during the third quarter o...